If the rate of earnings is 12% and the cash to be received in two years is $20,000,determine the present value amount,using the following partial table of present value of $1 at compound interest.

Question

Quizplus · Accepted Answer

Using the formula for present value of a single amount at compound interest: 
PV = FV/(1+i)^n 
where PV is the present value, FV is the future value, i is the interest rate, and n is the number of periods. 
Plugging in the given values, we get: 
PV = 20,000/(1+0.12)^2 
PV = 15,939.88 
Rounding to the nearest dollar, the present value amount is $15,940, which is choice B.

If the Rate of Earnings Is 12% and the Cash